DIY Investor Magazine
/
March 2017
7
EMERGING MARKETS
Terry Smith, of Fundsmith Emerging Equities, looks at
the effects of demonetisation in India and the growth
of ETFs investing in emerging markets. Hélène Ploix,
of Genesis Emerging Markets stresses that emerging
markets are now in a period of lower growth compared
with much of their recent history. The managers of that
fund are worried about Chinese policymakers prioritising
short-term growth over long-run economic reform and
the possibility of US protectionist policies.
FRONTIER MARKETS
Aberdeen Frontier Markets points out that valuations
of frontier markets look attractive relative to emerging
and developed markets: ‘at the time of writing, the
MSCI Frontier Markets Index trades on trailing price
to earnings and price to book ratios of 13.0x and 1.6x
compared with 21.9x and 2.2x respectively for the
MSCI World Index. Recovering energy and commodity
prices are highly stimulative for many frontier markets,
particularly those in Africa and the Middle East. This
is being reflected in a stabilisation in the outlook for
corporate earnings which, if it continues, would be
supportive of a marked recovery in a currently out of
favour asset class.’
PROPERTY
Derwent London cautions on the effect of hikes in
business rates and Brexit on London property. Intu
says there has been a flight to quality within the UK
retail property market post the referendum; yields are
supported by a lack of new development.
Alun Jones, of Primary Health Properties, describes in
some detail developments in the healthcare property
market in the UK. Mary Ricks of Kennedy Wilson
Europe Real Estate says of the UK property sector:
‘The industrial sector continues to perform strongly
with increasing take-up, benefiting from ongoing
structural shifts to online retail. Across the UK as a
whole, industrial property performed the strongest with
total returns of 7.2% over the last 12 months, according
to CBRE, the only sector to see rising capital values
over the year. We have seen strong high street retail
investment demand. In particular, the demand for small
lot sizes has been driven by demand from high net
worth investors, given the ongoing low yield environment
and recent stamp duty and buy-to-let tax changes
diminishing the relative attractiveness to traditional
residential investment for this buyer group.’
Green REIT delves deeper into the Irish property market,
believing that Ireland should start to see the benefit
of Brexit as soon as financial and fund administration
businesses start to move staff to the country
RENEWABLE INFRASTRUCTURE
Foresight Solar sees a bright future for the UK solar
industry on the back of improving power prices. Helen
Mahy, chairman of Renewables Infrastructure, says
development of UK onshore wind and solar plants will
slow, in the absence of new subsidies. Tim Ingram,
chairman of Greencoat UK Wind, points out that the
UK’s fifth carbon budget commits the UK to 80%
emissions reductions by 2050. The managers of that
fund see 7GW of offshore wind generation coming on
stream over the next few years.
TECHNOLOGY
Katie Potts, manager of the Herald Trust, said that she
was initially dismayed that US companies kept buying
the UK’s good companies cheaply, and now they are
just buying the people, including poaching staff from
investee companies. She reflected ‘it is good news
because these big companies will train people, and
some will leave and start businesses. On valuation
grounds the UK seems the most attractive, but at the
small end where illiquidity is at its most challenging. The
overseas listings have had the currency bounce, while
UK companies with overseas earnings should benefit
over time on translation of profits.’
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